Cubicle Corporation is in the machinery business. At the December 31, 2011 year-end, the following financial information

Question:

Cubicle Corporation is in the machinery business. At the December 31, 2011 year-end, the following financial information was available from the income statement: administrative expenses, $161,600; cost of goods sold, $700,840; income taxes, $14,000; interest expense, $45,280; interest income, $5,600; net sales, $1,428,780; and selling expenses, $440,400.

The following information was available from the balance sheet (after closing entries were made): accounts payable, $65,200; accounts receivable, $209,600; accumulated depreciation—delivery equipment, $34,200; accumulated depreciation—store fixtures, $84,440; cash, $56,800; common stock, $1.00 par value, 20,000 shares authorized, issued, and outstanding, $20,000; delivery equipment, $177,000; inventory, $273,080; investment in securities (long-term), $112,000; investment in U.S. government securities (short-term), $79,200; notes payable (long-term), $200,000; notes payable (short-term), $100,000; paid-in capital in excess of par value, $180,000; prepaid expenses (short-term), $11,520; retained earnings, ending balance, $518,600, beginning balance, $566,340; and store fixtures, $283,240.

Total assets and total stockholders’ equity at December 31, 2010, were $1,048,800 and $766,340, respectively; cash flow from operating activities were $60,000; and dividends for the year were $120,000.

REQUIRED

1. From the preceding information, prepare

(a) An income statement in single-step form,

(b) A statement of retained earnings,

2. From the statements you have prepared, compute the following ratios:

(a) Profit margin,

(b) Asset turnover,

(d) Debt to equity ratio,

(e) Return on assets,

(f) Cash return on assets,

(g) Return on equity. (Note: Round to one decimal place.)

3. Using the industry averages for the machinery industry given in the graphs in the ratio boxes throughout this chapter, determine whether Cubicle Corporation needs to improve its performance. Explain your answer, making recommendations as to specific areas on which Cubicle Corporation should concentrate.

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